Wednesday, 9 September 2015

WILL EARLY RETIREES BENEFIT FROM OROP ?

The ex-servicemen are satisfied with OROP being implemented from July 1, 2014, and with 2013 as the base year for calculating the new pensions.

Major General Satbir Singh shouts slogans along with other ex-servicemen as they react after the announcement of the implementation of ‘One Rank One Pension’ (OROP) scheme by the government, at Jantar Mantar in New Delhi on Saturday. (Source: PTI)

The hunger strike is over but the protest by ex-servicemen continues at Jantar Mantar. The breakthrough between the government and the veterans took effect last Saturday when Defence Minister Manohar Parrikar announced the implementation of the ‘One Rank One Pension’ (OROP) scheme. But the veterans and the government have agreed upon only one point; three points of disagreement still remain between the two sides, and one issue needs further clarity.

The ex-servicemen are satisfied with OROP being implemented from July 1, 2014, and with 2013 as the base year for calculating the new pensions. Their major disagreements are over the methodology used for determining the post-OROP pensions. First is the periodicity of equalisation of pension: the government has announced that it will be done every five years, the veterans want it done every two years. Next is the fixation of post-OROP pension: the government has announced an average of the highest and lowest of the pay scale, the veterans want it to be pegged at the highest of the scale. The last point of contention is the committee formed to look into anomalies arising out of this announcement of OROP: the government is setting up a one-member judicial committee with a mandate of six months, the veterans want military representation and the report within one month.

The immediate outrage among the ex-servicemen after Parrikar’s announcement was over the clause which excluded “voluntary” retirees from OROP. This is the issue that needs more clarity. Members of the armed forces, unlike civilian or corporate employees, have no provision for voluntary retirement: there are no golden handshakes offered for soldiers wanting to leave nor can anyone choose to quit on his own. What the armed forces instead have is a policy for premature retirement (PMR), whereby a serving soldier can apply for PMR from service.

Applying for PMR is no guarantee for release from service. Most applications — particularly of officers below the rank of Lt Colonel — are rejected by the armed forces citing a shortage of officers. Even for Lt Colonel and above, the number of people who can quit every year is very limited. Till a few years ago, it was normal for army officers to wait for 18 months after applying to know the fate of their request.

Government policies dictate provisions for PMR such as an officer should have served for at least 10 years before applying, or he should have a valid reason, from the list of reasons mentioned in the government policy letter, for his application to be considered. These applications are then reviewed by a board of officers before giving a final decision. Even after PMR is granted, the soldier remains on the reserve list for five years, wherein he can be recalled for active military service anytime during that period. It can be safely said that PMR is as far away from voluntary retirement as military life is from the civil one.

Do all soldiers who take PMR get pension? No, minimum pensionable service for officers is 20 years, and for personnel below officer rank (PBOR), 15 years. Pensions being deferred wages, as per the order of the Supreme Court, excluding those who take PMR from OROP is bound to result in a legal challenge on grounds of discrimination.

It is in the interest of the military to encourage personnel to apply for PMR after a point. The military is a steeply pyramidal hierarchy where only three per cent officers attain the rank of Brigadier. The numbers are further minuscule in the star ranks. Unlike their civilian counterparts whose pay rises irrespective of promotion, the soldier’s pay is linked to military rank. The lack of financial benefits, along with the prevailing culture of the military where no senior wants to serve under a junior, means there is little motivation for superseded officers to serve. The armed forces prefer the young and the motivated, and thus favour superseded officers proceeding on PMR. By excluding officers who seek PMR from the ambit of OROP, the government will be encouraging such officers to stay and increase the flab in the military.

Statements by the defence minister and the Prime Minister have not cleared the confusion on OROP for officers who have taken PMR. This clarity will come only from the government notification on OROP which is expected to be issued within a month. The veterans fear that the government can kick the issue of PMR further down the road by referring it to the one-man judicial committee. It is indicative of the lack of trust bred by the bad blood created between the veterans and the government in past few months.

The ex-servicemen cannot be completely blinded by mistrust. Rather than assume that every announcement is a sinister civilian conspiracy against them, the veterans need to appreciate the fiscal constraints of the government. By putting in some caveats while announcing the OROP, the government has tried to limit the fiscal outflow.

This is a government committed to bringing the fiscal deficit down and an additional expenditure of Rs 18,000-22,000 crore this year is going to put all its plans in jeopardy. With the Seventh Pay Commission scheduled to be implemented from next year, coupled with the increased burden of OROP, it can jeopardise all the good intentions of the finance minister. A fiscally irresponsible government will quickly earn the wrath of rating agencies, making it more difficult to attract investment to revive the economy. It is something the government can ill afford, notwithstanding Modi’s unequivocal public commitment in September 2013 to implement OROP without conditions.